Outlook for Auckland region

New Zealand’s economic growth slowed during 2024, with the prospects of a slow recovery in in the latter half of 2025. The downside risks to the economic outlook have increased with the unpredictable announcements from the White House impacting on the uncertainty over the direction of world trade and economic growth. Tight fiscal conditions imposed by the National-led coalition will also impact on overall economic activity. However, falling domestic interest rates, a lower New Zealand dollar, and improving business confidence should support economic activity in the short to medium term. In addition, a rebound in overseas visitor arrivals and ongoing net overseas migration gains are likely to support growth.

Auckland is the country’s largest region and main economic hub. The region’s service-based economy has proven to be more resilient than that of other centres. In addition, Auckland has, in recent years, benefited from high population growth driven by overseas migration. The rebound in the number of overseas and domestic tourists visiting Auckland should also provide some partial relief to retailers and the hospitality sector.

Labour market conditions have softened due to the region’s flat economic performance over the past year. Growth in the number of people employed in Auckland fell by 2.0%. The region’s unemployment rate has also increased from 4.6% in June 2024 to 5.3% in December 2024. On a more positive note, the steady inflow of overseas migrants into the country, and in particular the Auckland region, has continued to boost population growth and support demand in the housing market. In the medium term, Auckland’s economy is expected to outperform the rest of the country and remain the centre of the country’s economic performance.

Office market

The underlying fundamentals of Auckland’s office market have continued to evolve over the last 12 months. The amount of vacant space within the CBD has continued to increase, driven in part by the completion of a number of office building developments. Tenant relocation to new and other leasing opportunities has resulted in the accumulation of vacant space in lower-quality office buildings. 

Potential repurposing of these lower-quality buildings to alternative uses offers an opportunity to reduce the amount of vacant space. Alternatively, owners will need to consider upgrading the space and potentially offering turnkey solutions to potential tenants. At this stage of the office market cycle, the economics of these alternatives may be mixed. Overall, demand for space has started to improve, focused on good to prime quality space within the CBD’s preferred precincts. Although there has been some rental growth over the last year, growth in building operating expenses, particularly rates and insurance, has increased tenants’ occupancy costs and dampened landlords’ ability to increase rents.

Vacancy rates within the CBD are now 14%, up from 12% a year ago. The metropolitan office market has experienced a similar trend, with the overall vacancy rate increasing from 8% a year ago to 10% in March 2025. Despite the increase in vacancy rates, market rents have remained flat over the last year. Investor demand and sales activity have continued to be impacted by the current market outlook, with high vacancy rates, moderate growth in tenant demand, and limited rental growth.

Industrial market

The industrial property market has started to rebound, with steady tenant leasing activity and increased sales activity, with both investors and owner-occupiers active in the market. Landlords are also being proactive and, in some cases, offering tenant incentives to renew their leases and remain in their current premises.

The number of building consents for industrial premises has remained robust, with 131 consents issued for a total of 312,000m² of space, in the 12 months ended December 2024. The ongoing falls in interest rates and expectations of further cuts have created a more positive vibe in the market and increased sales activity of industrial building investments.

The market’s overall vacancy rate increased to just over 2% in December 2024, up from just over 1% a year earlier. The lift in vacancy rates was unevenly distributed across the market’s different precincts, with vacancy rates in South Auckland increasing off historical lows. Tenant demand for space has started to improve, and landlords are being proactive in trying to retain tenants in their existing space. Some are offering tenants incentives to renew their leases on their existing premises. Developers are continuing to seek tenants for their proposed developments; however, current high land values and building costs, combined with flat rental growth, make it a challenge to achieve the required margins in their project feasibilities.

Investor confidence has started to improve, with the recent falls in interest rates supporting buyer activity. Investment yields have also eased, reflecting improved market sentiment. Expectations of further falls in interest rates will also assist with interest in industrial building investments. However, bank lending criteria remain firm, which in the short term may temper growth in investor demand. Overall, there is demand for well-located and leased industrial properties priced to reflect today’s market conditions.

Retail market

New Zealand’s retail sector has continued to evolve and face challenges from softening economic activity, uncertain labour market conditions, and tighter government spending. Over the past 12 months, household finances have been under pressure, with growth in the cost of living and high mortgage interest rates which has impacted on disposable incomes and limited discretionary spending.

Over the next 12 months, household spending is expected to gradually increase, with lower mortgage interest rates and other stimulus measures boosting disposable incomes. On a positive note, consumer confidence in the region has also improved over the past 12 months, with more households having a positive rather than a pessimistic outlook. Auckland’s population has continued to increase at a faster rate than the national average increasing by 2.8% over the past year.

In today’s challenging economic conditions, retailers will need to continue to innovate to maintain their customer base, as they face increased competition from non-store-based retailing by both domestic and overseas companies. The impact of these trends on the retail property market continues to be mixed, with ongoing demand for retail space in prime areas and more challenging market conditions in secondary locations.

Our research
The market reports included in this publication have been prepared independently by Ian Mitchell from Livingston and Associates.
Every effort has been made to ensure the soundness and accuracy of the opinions, information, and forecasts expressed in this report. Information, opinions and forecasts contained in this report should be regarded solely as a general guide. While we consider statements in the report are correct, no liability is accepted for any incorrect statement, information or forecast. We disclaim any liability that may arise from any person acting on the material within.